BUSLAW REVIEWER
NOMINATE – has a special name or
LAW ON SALES
Articles 1458-1637 of the Civil Code of the
Philippines
CONTRACT OF SALE - “Art. 1458. By the
contract of sale, one of the contracting parties
obligates himself to transfer ownership of and to
deliver a determinate thing, and the other to pay
therefor a price in money or its equivalent.”
PARTIES TO A SALE
1. SELLER/VENDOR – the contracting party who
has the obligation to:
a. Transfer ownership &
b. Deliver a determinate thing
2. BUYER/VENDEE – the other contracting party
who has the obligation to:
a. Pay a price certain in money or its equivalent
KINDS OF SALE (LAST SENTENCE, ART.
1458)
SALE AS DISTINGUISHED FROM OTHER
CONTRACTS
CHARACTERISTICS OF SALE
1. CONSENSUAL – perfected by the mere
consent of the parties
2. BILATERAL – reciprocal obligations of
both parties to a sale
3. ONEROUS – the thing sold is conveyed in
consideration of the price and vice versa
4. COMMUTATIVE – the thing sold is
equivalent to the price paid
5.
designation under the law
6. PRINCIPAL – does not depend for its
existence and validity on some other
contract
ELEMENTS OF A CONTRACT OF SALE
1. CONSENT
– Meeting of the minds between the seller
and the buyer as to the offer and acceptance upon
the thing and the price
* Note: legal capacity to give
consent
2. OBJECT OR SUBJECT MATTER
– Refers to the determinate thing or a thing
capable of being made determinate
- May be real or personal properties, rights
3. CAUSE OR CONSIDERATION
– Price certain in money or its equivalent (as
to the seller)
- Delivery of the thing (as to the buyer)
1st ELEMENT: CONSENT
- Express or implied
- Legal capacity to give consent
- If consent is not given by one or both
parties, the contract is void
IN RELATION TO CAPACITY TO BUY OR
SELL
“Art. 1489. All persons who are authorized in this
Code to obligate themselves, may enter into a
contract of sale, saving the modifications contained
in the following articles.
Where necessaries are those sold and delivered to a
minor or other person without capacity to act, he
must pay a reasonable price therefor. Necessaries
are those referred to in Article 290.”
KINDS OF CAPACITY:
1. JURIDICAL CAPACITY
- The fitness to be the subject of legal
relations
2. CAPACITY TO ACT
- Power to do acts with legal effects
KINDS OF INCAPACITY
1. ABSOLUTE INCAPACITY – Those who
cannot validly give consent to any contract
Ex. Minors, insane or demented persons,
deaf-mutes who do not know how to write
2. RELATIVE INCAPACITY – Those
prohibited to enter into specific contracts under
certain circs.
a. Sale between spouses, in general (Art.
1490)
b. Sale by persons mentioned under Art.
1491, either in person or through an intermediary,
namely:
- Guardians, agents, executors and administrators
- Public officers and employees
- Justices, judges , prosecuting attorneys, clerks
of superior and inferior courts, and
other officers and employees connected with the
administration of justice (includes the act of
acquiring by assignment and shall likewise apply
to lawyers)
- Any others specially disqualified by law.
2nd ELEMENT: OBJECT
THING must be:
1. LICIT and vendor must have the RIGHT
TO TRANSFER OWNERSHIP thereof at
the time it is delivered (Art. 1459)
- Lawful, not contrary to law, morals, good
customs, public policy
- Within the commerce of men
2. DETERMINATE (Art. 1460)
- Particularly designated;
- Physically segregated from all others of
the same class; or
- Capable of being made determinate
without necessity of a new or further agreement
3. HAVE POTENTIAL EXISTENCE (Art.
1461)
- Emptio Rae Speretae
- Future things may be the object of a sale
(potential existence and title vests in the
buyer the moment the thing comes into existence)
* SALE OF A MERE HOPE OR
EXPECTANCY or Emptio Spei is VALID
* SALE OF VAIN HOPE OR
EXPECTANCY is VOID
4. POSSIBLE
SALE OF:
 EXISTING GOODS or FUTURE
GOODS (Art. 1462)
- Future goods – to be manufactured, raised or
acquired by the seller after the perfection of
the contract of sale
 UNDIVIDED INTEREST (Art. 1463)
- By sole owner – sells undivided share or interest
or specific portion
- By a co-owner – may dispose share without the
consent of the other co-owners
 UNDIVIDED SHARE OF A SPECIFIC
MASS (Art. 1464)
- Fungible goods – goods of which any unit is
treated as the equivalent of any other unit (e.g.
grain, oil or wine)
- Undivided share – buyer becomes co-owner
in proportion to the definite share bought
(e.g. 250 unsegregated cavans)
 THING SUBJECT TO A RESOLUTORY
CONDITION (Art. 1465)
- Resolutory condition - uncertain event the
happening of which shall extinguish the obligation
(e.g. Pacto de Retro Sale)
 GOODS BY DESCRIPTION AND/OR
SAMPLE (Art. 1481)
- may be rescinded IF bulk of goods delivered do
not correspond with the description or sample
Sale by description – sells things as being of a
particular kind; relies on description given
Sale by sample – a small quantity is exhibited as
fair specimen of the bulk; implied warranty that the
goods shall be free from any defect not apparent
3rd ELEMENT: CAUSE or CONSIDERATION
PRICE must be:
1. CERTAIN (Art. 1469)
- Capable of being ascertained in money or its
equivalent
- IF left to the judgment of a third person –
valid except if third person is in bad faith
2. ADEQUATE
- Gross inadequacy of price (Art. 1470) – shall not
invalidate sale; may indicate defect in consent or
that parties intended a donation or other contract
3. NOT BE SIMULATED (Art. 1471)
- If simulated (i.e. fictitious price), the sale is void
- But the act may be a donation or some other
contract
4. BE FIXED BY BOTH PARTIES (Art. 1473)
- Cannot be left to the discretion of one of the
contracting parties
- However, if price fixed is accepted, the sale is
perfected
- If price cannot be determined, the sale is void. But
where delivery was made, the buyer must pay a
reasonable price therefor (Art. 1474)
PERFECTION OF SALE
“Art. 1475. The contract of sale is perfected at the
moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.
From that moment, the parties may reciprocally
demand performance, subject to the provisions of
the law governing the form of contracts.”
- Meeting of the minds upon the thing and the
price
- In case of failure to pay the price, the seller
may demand specific performance or
rescission of the contract, with payment of
damages in both cases (in relation to Art.
1592)
GENERAL RULE: DELIVERY TRANSFERS
OWNERSHIP
“Art. 1477. The ownership of the thing sold shall
be transferred to the vendee upon the actual or
constructive delivery thereof.”
- Title passes upon actual or constructive
delivery EXCEPT when there is a
stipulation that ownership shall not pass
until full payment of the price (in relation to
Art. 1478)
OPTION CONTRACT
(Par. 2, Art. 1479)
- Property owner agrees with another person
that the latter shall have the right to buy the
former’s property at a fixed price within an
agreed period
- Right or privilege to buy the owner’s
property and pays a consideration therefor
- OPTION MONEY – a consideration
separate and distinct from the purchase price
for the exercise of the above right or
privilege
OPTION CONTRACT vs. RIGHT OF FIRST
REFUSAL
EARNEST MONEY (Art. 1482)
- Considered as part of the purchase price
- Proof of the perfection of the contract of sale
- i.e. down payment, partial payment
deductible from the purchase price
FORM OF SALE
“Art. 1483. Subject to the provisions of the Statute
of Frauds and of any other applicable statute, a
contract of sale may be made in writing, or by word
of mouth, or partly in writing and partly by word of
mouth, or may be inferred from the conduct of the
parties.”
GENERAL RULE: any form (i.e. in writing, word
of mouth, partly in writing and word of mouth, or
may be inferred from parties’ conduct
EXCEPTIONS: those under the Statute of Frauds
(in writing, otherwise unenforceable)
STATUTE OF FRAUDS
- in writing, otherwise unenforceable
a. Sale of personal property with a value of not
less than P500.00;
b. Sale of real property or interest therein (must
appear in a public instrument and registered
with the property registry of deeds to bind
third persons)
c. Sale of property not to be performed within
a year from the date thereof
OBLIGATIONS OF THE SELLER OR
VENDOR
 As imposed by LAW
1. To transfer ownership of the thing
sold;
2. To deliver the thing, including its
fruits;
3. To warrant the object sold against
eviction and hidden defects;
4. To take care of the thing sold with
the diligence of a good father of
the family;
5. To pay for execution and
registration, unless there’s a contrary
stip.
 As imposed by the parties through
STIPULATIONS
TO TRANSFER & TO DELIVER (Art. 1495)
- Ownership of the thing is transferred by
delivery (Art. 1496)
- DELIVERY - Concurrent transfer of
ownership/control & possession
- Actual or constructive delivery (Arts. 1497-
1501)
* Payment is not essential to transfer ownership
when there has been delivery of the thing
KINDS OF DELIVERY
1. REAL OR ACTUAL
“Art. 1497. The thing sold shall be understood
as delivered, when it is placed in the control
and possession of the vendee.”
2. LEGAL OR CONSTRUCTIVE
 - Delivery by operation of law
3. QUASI-TRADITIO
- Delivery of rights, credits or incorporeal
property
KINDS OF LEGAL OR CONSTRUCTIVE
DELIVERY
1. EXECUTION OF A PUBLIC
INSTRUMENT (Art. 1498)
2. TRADITIO SIMBOLICA – use of symbol
to represent the thing delivered (Par. 2, Art.
1498)
3. TRADITION LONGA MANU – pointing
out of the object without actual delivery
(Art. 1499)
4. TRADITIO BREVI MANU – possession
of the thing is with the would be buyer prior
to the sale (conversion to possession in the
concept of an owner) (Art. 1499)
5. TRADITIO CONSTITUTUM
POSSESSORIUM – opposite of brevi
manu (Art. 1500)
QUASI-TRADITIO - Delivery of rights,
credits or incorporeal property (Art. 1501)
1. Execution of a public instrument (from
delivery of certificates, ownership passes)
2. Placing of titles of ownership in the
possession of the vendee
3. Use by the vendee of his rights with the
vendor’s consent
DELIVERY OF MOVABLES
1. Delivery of the thing plus accessories and
accessions, including fruits;
2. If goods delivered are less than under the
contract = Buyer has the option to accept or
reject it
3. If goods delivered are more than under the
contract = Buyer has the option to:
a. Accept as per contract and reject the rest
b. Accept the whole and pay the price
c. Reject the whole if the subject matter is
indivisible
DELIVERY OF IMMOVABLES
1. IF SOLD PER UNIT OR NUMBER
- Statement of its area, rate at certain price = deliver
all that may have been stated under the contract
a. If delivered is lesser = rescission or
proportional reduction of price (lack in the
area is not less than 1/10 of area agreed upon)
b. If delivered is greater = accept as per
contract and reject the rest or accept the whole area
and pay at contract rate
2. IF SOLD FOR LUM SUM
- Price per unit is not indicated
- If area delivered is lesser or greater = price will
not be adjusted
DELIVERY OF FRUITS and ACCESSIONS
and ACCESSORIES - Accrue from the time the
sale is perfected but no real right over it until it is
delivered
 DELIVERY THROUGH CARRIER
GENERAL RULE: delivery to the carrier is
delivery to the buyer
EXCEPTION: a contrary intention appears or there
is implied reservation of ownership under Pars. 1, 2
& 3 of Art. 1503
PLACE OF DELIVERY
WHERE should the thing or goods be delivered?
(Art. 1521)
Consider: 
1. The stipulation of the parties;
2. The place fixed by usage or trade;
3. The place of business of the seller;
4. The seller’s place of residence;
5. If the thing is not in the place of business of
the seller, place of delivery shall be where
the thing is located at the time of perfection
of the contract.
 Also applicable to time of delivery
EFFECT OF DELIVERY
GENERAL RULE:
Ownership of thing shall be transferred to the buyer
upon actual or constructive delivery
EXCEPTIONS:
1. In a contract to sell
2. Sale on acceptance or approval
3. Sale or return
SALE OR RETURN or SALE ON APPROVAL
 SALE OR RETURN – Ownership passes
to buyer upon delivery; buyer has the option
to return the same to the seller instead of
paying the price (Art. 1502)
 SALE ON APPROVAL – Title shall
continue in the seller until:
 a. Buyer approves the goods or accepts
it
b. Buyer retains goods without giving
notice of rejection (fixed time, upon
its expiration; no time, upon
expiration of reasonable time)
- Also called sale on acceptance, sale on trial or sale
on satisfaction (1502)
DOUBLE SALES (Art. 1544)
REQUISITES:
1. Two or more sales transactions constituting
valid sales;
2. Two or more sales transactions pertaining to
the same thing;
3. Two or more buyers at odds over the rightful
ownership; and
4. Two or more buyers bought from the same
seller
If the thing sold is a MOVABLE:
- The first person who took possession in
good faith has a better right.
If the thing sold is an IMMOVABLE:
- The buyer who first registers in good faith
has a better right.
- If there was no registration, then the
person who first took possession.
- If neither is in possession, the buyer with the
oldest title in good faith.
(Good faith means having no knowledge of the
defect on the title of the seller)
TO WARRANT AGAINST EVICTION and
HIDDEN DEFECTS
WARRANTY
- A statement or representation made by the
seller contemporaneously and as part of a
contract of sale
- Having reference to the character, quality or
title of the goods
- And by which seller promises or undertakes
to insure that certain facts are or shall be as
he then represents
EXPRESS WARRANTY (Art. 1546)
1. Any affirmation of fact or any promise by
the seller relating to the thing;
2. The natural tendency of such affirmation or
promise is to induce the buyer to purchase
the same
3. Buyer purchases the thing relying thereon.
• In case of breach = Seller is liable for
damages
 Effect of expression of opinion – not a
warranty unless the seller is an expert and
the opinion is relied upon by the buyer
IMPLIED WARRANTY (Art. 1547)
- Deemed included in all contracts of sale
whether parties are actually aware or not or
whether they were intended or not
- Warranty by operation of law
KINDS:
A. Warranty against Eviction
• INCLUSIONS:
1. That the seller has the right to sell at the
time ownership is to pass;
2. That the buyer shall enjoy the legal and
peaceful possession of the same
B. Warranty against Hidden Defects
1. Subject matter may be a movable or
immovable;
2. Nature of hidden defect is such that it should
render the thing unfit for the use for which it
was intended or should diminish its fitness;
3. Had the buyer been aware, he would not
have acquired it or would have given a
lower price
• There is breach when:
- The defect is hidden and not patent
- The defect must have already existed at the
time of the sale
C. Warranty against Redhibitory Defects
SPECIFIC IMPLIED WARRANTY IN SALE
OF GOODS
WARRANTY AS TO THE FITNESS AND
QUALITY
• REQUISITES:
- Buyer makes known to seller the particular
purpose for which goods are acquired and it
appears that the buyer relied on the seller’s
skill or judgment;
- Goods are bought by description from
seller who deals in goods of that description
1. SALE OF ANIMALS IN FAIRS
- no warranty against hidden defects
- with warranty against eviction or title
2. PUBLIC AUCTIONS
- no warranty against hidden defects
- with warranty against eviction or title
 3. “AS IS WHERE IS” sales
- no warranty as to the fitness of the thing
- with warranty against eviction
4. SALE OF SECOND HAND ITEMS
TO PRESERVE AND TO PAY EXPENSES
 OBLIGATION TO PRESERVE THE
THING
- With the diligence of a good father of a
family
- In the condition in which they were upon the
perfection of the contract
 OBLIGATION TO PAY FOR THE
EXECUTION AND REGISTRATION
- General Rule: Seller bears obligation to pay
- Except: Contrary stipulation
OBLIGATIONS OF THE BUYER OR
VENDEE
1. To pay the price
- According to the terms agreed upon
regarding time, place and amount
- If payment of interest is stipulated – pay
the same
- In case of default in the payment of the
price = breach of contract where specific
performance or rescission may be resorted to
plus payment of damages and interests
2. To accept delivery of the thing sold
There is ACCEPTANCE when:
- Buyer intimates to seller that he has
accepted;
- Buyer does any act inconsistent with
ownership of seller; or
- Buyer retains thing without intimating to
seller that he has rejected
UNPAID SELLER (Art. 1525)
1. One who has not been paid or tendered the
whole price; or
2. One who has received a bill of exchange or
negotiable instrument as conditional
payment and the same was dishonored
REMEDIES OF UNPAID SELLER (Art. 1526)
Notwithstanding that the ownership in the goods
may have passed to the buyer, the unpaid seller of
goods, as such, has:
1. Lien on the goods or the right to retain them
(possessory lien)
2. Stoppage in transitu
3. Right of resale
4. Rescission
1. POSSESSORY LIEN (Art. 1527)
The unpaid seller of goods who is in possession of
them is entitled to retain possession until payment
or tender of the price in the following cases,
namely:
1. Goods have been sold without any
stipulation as to credit;
2. Goods have been sold on credit but the term
of credit has expired;
3. Where the buyer becomes insolvent
WHEN UNPAID SELLER LOSES LIEN (Art.
1529)
The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier for
transmission to the buyer without reserving the
ownership in the goods or the right to the possession
thereof;
(2) When the buyer or his agent lawfully obtains
possession of the goods;
(3) By waiver thereof.
2. STOPPAGE IN TRANSITU (Art. 1530)
• When the buyer of goods is or becomes
insolvent, the unpaid seller who has parted
with the possession of the goods has the
right of stopping them in transit
• Unpaid seller may resume possession of the
goods at any time while they are in transit,
and he will then become entitled to the same
rights in regard to the goods as he would
have had if he had never parted with the
possession.
- either by obtaining actual possession or by
giving notice of his claim to the carrier
GOODS IN TRANSIT (Art. 1531)
The GOODS ARE IN TRANSIT when:
a. After delivery to a carrier and before the
buyer or his agent takes delivery of them;
b. If the goods are rejected by the buyer and
the carrier continues in possession of them
3. RIGHT OF RESALE (Art. 1533)
• Can be exercised when he has either a right
of lien or a right to stop the goods in transitu
• And under any of the 3 following cases:
1. Goods are perishable in nature
2. Right to resell is stipulated in case of default
3. Buyer delays in the payment of the price for
an unreasonable time
4. RIGHT OF RESCISSION (Art. 1533)
 REQUISITES:
1. Right to rescind is stipulated in case of
default
2. Buyer delays in the payment of the price for
an unreasonable time
> Notice must be given by the unpaid seller
EXTINGUISHMENT OF SALE
REDEMPTION:
1. CONVENTIONAL REDEMPTION
When the seller reserves the right to repurchase the
thing sold in the same instrument of sale as one of
the stipulations of the contract
PERIOD OF REDEMPTION:
- No period stipulated = 4 years from date of
the contract
- Period stipulated = not to exceed 10 years
CONVENTIONAL REDEMPTION
a. Seller a retro must return:
a. Price of the sale
b. Expenses of the contract and other
legitimate payments made by reason of the sale;
c. Necessary and useful expenses made on
the thing sold
b. Complying with any other stipulation agreed
upon, if any
AVAILABLE TO:
1. SELLER (or his agent/heirs/assigns)
2. CREDITORS of seller, AFTER they have
exhausted the seller’s property
• If co-owners, jointly and in the same
contract, sell an undivided immovable, each
may redeem only his respective share
• If a sole owner sells an immovable and
leaves several heirs, each heir may redeem
only his share
In these 2 cases, the buyer a retro may demand all
the sellers a retro or heirs to buy redeem the whole
thing and he cannot be compelled to agree to a
partial redemption.
EQUITABLE MORTGAGE
- One which, although lacking in some formality, or
form or words, or other requisites demanded by a
statute, nevertheless reveals the intention of the
parties to charge real property as security for a debt,
and contains nothing impossible or contrary to law.
REQUISITES OF PRESUMPTION
a. that the parties entered into a contract
denominated as a contract of sale, and
b. that their intention was to secure an existing
debt by way of a mortgage.
 In case of doubt, a contract purporting to be
a sale with right to repurchase shall be
construed as an equitable mortgage
REDEMPTION:
2. LEGAL REDEMPTION (Arts. 1619-1623)
- the right to be subrogated upon the same terms and
conditions stipulated in the contract, in the place of
one who acquires a thing by onerous title (such as
sale or dation)
INSTALLMENT SALES RECTO LAW
- Sale of movable in installments
Seller may exercise any of the following:
1. Exact fulfillment if there is failure to pay;
2. Cancel sale if there is failure to pay 2 or
more installments; or
3. Foreclose chattel mortgage on the thing sold
if there is failure to pay 2 or more
installments; cannot recover any unpaid
balance
The above alternative remedies are likewise
applicable to contracts purporting to be leases of
personal property with option to buy (Art. 1485)
 Forfeiture of installments - Valid EXCEPT
if unconscionable under circumstances (Art.
1486)
INSTALLMENT SALES MACEDA LAW
- Sale of immovable in installments
(Republic Act No. 6552 or The Realty
Installment Buyer Act)
- Intended to protect ordinary buyers of
residential realty under contracts of sale,
contracts to sell and financing
- Provides for remedies of buyer who paid for
less than 2 years or more than 2 years
MACEDA LAW
FOR BUYERS WHO PAID AT LEAST 2
YEARS OF INSTALLMENTS:
1. Pay balance without interest within 1 month
grace period for every year of installment
payment (grace period exercised once every
5 years)
2. No payment made during grace period = the
contract is cancelled and buyer is entitled to
50% of what he has paid + if more than 5
 years, 5% for every year but not to exceed
90% of total payments made (cancellation
shall be effected 30 days from notice and
upon payment of cash surrender value)

FOR BUYERS WHO PAID LESS THAN 2

YEARS OF INSTALLMENTS:
1. 1st grace period of 60 days from date the
installment became due
2. 2nd grace period of 30 days from notice of
the cancellation or demand for rescission
OTHER RIGHTS:
a. Sell interests under the contract
b. Assign rights under the contract